Kyari: N130bn Monthly Loss to Petrol Underpricing No Longer Sustainable

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•Corporation records N2.1tn from petrol sale in one year
•Sylva explains why Nigeria wants to import fuel from Niger

Deji Elumoye, Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Malam Mele Kyari, yesterday made a case for a prompt conclusion of talks between the federal government and the organised labour to resolve the dispute over the appropriate pricing of petrol.
He expressed concern about the current underpricing of the commodity, which he said has resulted in the NNPC losing N130 billion monthly due to the sale of the commodity below the market price.

He warned that the corporation could no longer continue to bear the loss.
He, however, told State House reporters in Abuja that plans were underway to exit the underpricing regime.
The corporation also yesterday said it generated N2.197 trillion from the sale of petrol between December 2019 and December 2020.

In addition, the Minister of State for Petroleum Resources, Chief Timipre Sylva, has explained why Nigeria wanted to import fuel from Niger Republic and justified the federal government’s plan to rehabilitate the Port Harcourt refinery with $1.5 billion.
Kyari said the pump price of petrol in the country was far lower than in neighbouring countries.

He stated that that was why the underpricing would have to be addressed soon to bring it at par with the actual value of the product.
He said: “Today as we speak, I will not say that we are in a subsidy regime but we are in a situation where we are trying to exit the underpriced sale of petrol until we come to the full value of the product in the market. We want to use this opportunity to tell you that petrol today sells at above N200 per litre across our borders and in some places about N500 per litre.

“In some countries, the Nigerian fuel is their territory fuel and we are supplying almost everybody in the West African region. We cannot continue to afford this because we have our own issues. That’s why the eventual exit from this is completely inevitable.
“When that will happen I don’t know, but I know that some engagements are going on. The government is concerned about the natural impact of price increase on our transportation and other consumer aspects of our society.”

He put daily consumption of petrol at 60 million litres, at a selling price of N162 per litre, while the actual market price is N234, leaving the NNPC with an extra cost of about N130 billion monthly.

“The current consumption is about 60 million litres per day; we are selling at N162 per litre and the current market price is N234, the actual market price today. The difference between the two is to multiply 60 million by 30 which will give you per month. I don’t have the numbers now, this is simple arithmetic we can do. But if you want the exact figure from our books, I do not have it at this moment, but it is between N100 billion and N130 billion per month. I don’t have the exact number.”
Kyari said NNPC remains the sole importer of fuel.

He said the federal government would continue to engage the organised labour with a view to arriving at a right price regime for petrol as well as coming up with relief measures to cushion the effects of the planned fuel price hike on the people.
Sylva, while speaking on the agreement between Nigeria and the Niger Republic for the importation of petrol from the neighbouring country, stated that it was to boost trade between the two countries.

According to him, Nigeria wants to legalise the thriving illegal petroleum products sale already going on between the countries, and it also needed to share its experience in the oil exploration sector with neighbouring countries.

He said: “You know that Niger is a smaller country and Nigeria is more experienced in oil exploration than most countries in Africa. You find out that most of these countries have these constraints. Although we have this agreement with Niger, but they have constraints on how to deliver it to this country because of the contract they have with the Chinese. So, if we realise that they have constraints we can change.

“The whole idea is that Niger has 20,000 barrels per day (bpd), which is even bigger than their consumption.
“There is already illegal trading going on between Nigeria and Niger. So, what we want to do is to see how we can legalise it. We want to begin to create business with our neighbours. This is what ECOWAS and AU are trying to encourage. That is inter-regional trade and we begin to trade among ourselves.”

On why the federal government planned to invest $1.5 billion on the rehabilitation of the Port Harcourt refinery when it was talking about privatisation and commercialisation, he said: “I have always said that our refinery cannot survive with the regime of subsidy because you cannot be refining at a cost and selling at a subsidised rate. Now those constraints will be taken away by deregulation. That is the more reason why we must fix our refineries so that our refineries can now function optimally.”

The minister stated that the government resolved to rehabilitate the refinery based on experts’ recommendations.
“Which is better – to privatise a non-functional refinery or to privatise a functional refinery? A functional refinery will definitely fetch more for the government than a non-functional refinery. That’s why we feel that we have to rehabilitate this refinery and then the government will later decide on whether to privatise, whether to commercialise. But at this point, we want to give Nigerians a functional refinery,” Sylva said.

He expressed optimism that the Petroleum Industry Bill, which was repackaged and sent to the National Assembly, last year, will be passed next month.

He said: “From the way both the President of the Senate, Dr. Ahmad Lawan, and House Speaker, Hon. Femi Gbajabiamila, spoke on the PIB recently, I know they will get the bill passed as soon as they return from the Easter break in April.”

Sylva, however, stated that he could not say if the 2.5 per cent provided for host communities as their profit share in the PIB has been addressed based on the request by the representatives of the host communities to increase it to 20 per cent.
According to him, the two chambers of the National Assembly have the final words on this “and I think the leadership of the Assembly will be in a position to talk about this.”

Meanwhile, the NNPC yesterday announced that it generated N2.197 trillion from the sale of petrol between December 2019 and December 2020.
The figure was contained in the December 2020 edition of the NNPC Monthly Financial and Operations Report (MFOR).

A statement by the Group General Manager, Group Public Affairs Division of the corporation, Dr. Kennie Obateru, that 2.26 billion litres of white products were sold and distributed by the Petroleum Products Marketing Company (PPMC) in December 2020 compared to 1.72 billion litres last November.

It added that this comprised 2.254 billion litres of petrol, translating to 72.72 million litres per day, 11.40 million litres of diesel and 0.48 million litres of kerosene.

Total sale of white products from December 2019 to December 2020, the corporation stated, stood at 18.456 billion litres, with petrol accounting for 18.325 billion litres or 99.29 per cent.
NNPC said the volume translated into a value of N288.77 billion recorded on the sale of white products by PPMC in December 2020 compared to N226.08 billion sales in November 2020.

“Total revenues generated from the sales of white products for the period December 2019 to December 2020 stood at N2.217trillion, where petrol contributed about 99.09 per cent of the total sales with a value of N2.197 trillion,” the NNPC stated.

According to the corporation, it also posted an increase of 80.12 per cent in “trading surplus” for December 2020, which stands at N24.19billion compared to the N13.43 billion surplus recorded last November.

NNPC stated that its trading surplus or trading deficit is derived after deduction of the expenditure profile from the revenue in the period under review.

According to the report, the operating revenue of the NNPC group in December 2020 as compared to November 2020 increased by 33.44 per cent or N137.00 billion to stand at N546.65 billion.

Similarly, expenditure for the month increased by 27.54 per cent or N112.81billion to stand at N522.47 billion.